Notification of Disallowance of the Treasury Laws Amendment (Greater Transparency of Proxy Advice) Regulations 2021

Overview

The Treasury Laws Amendment (Greater Transparency of Proxy Advice) Regulations 2021 were introduced to address the need for increased transparency and clarity in proxy advice provided to shareholders, particularly in the context of voting at general meetings of companies and superannuation funds. The regulations aimed to ensure that proxy advice is more accessible and understandable to the average shareholder, thereby enhancing their ability to make informed decisions. Enacted by the Parliament of Australia, these regulations sought to achieve the policy objective of improving the quality and transparency of proxy advice to foster better corporate governance practices. The disallowance of these regulations by the Senate on 10 February 2022, as notified in the Gazette, reflects a legislative action taken to reconsider or revise the approach to enhancing shareholder engagement and proxy voting transparency.

Scope and Application

The disallowance of the Treasury Laws Amendment (Greater Transparency of Proxy Advice) Regulations 2021, as notified in C2022G00119 (Gazette), affects entities regulated under the Corporations Act 2001 and the Superannuation Industry (Supervision) Act 1993. These entities include companies, financial products, and superannuation funds, as well as their directors, officers, and advisors who are involved in providing proxy advice. The geographic reach of this legislation is national, as it pertains to the Commonwealth of Australia, ensuring a uniform standard of transparency across different states and territories. The disallowance nullifies the regulations that were intended to increase the transparency of proxy advice given to shareholders and members of corporations and superannuation funds, thus removing any obligations that these entities might have had to adhere to under the now-disallowed regulations. The resolution passed by the Senate on 10 February 2022 signifies that the regulations will not proceed as initially intended, leaving the existing legislative framework in place without the additional transparency requirements.

Key Provisions

The key provisions of the Treasury Laws Amendment (Greater Transparency of Proxy Advice) Regulations 2021 (the "Regulations") are primarily focused on enhancing the transparency of proxy advice provided in relation to corporate and superannuation entities. Section 3 of the Regulations mandates that proxy advice must be clear and specific, ensuring that it is not misleading or deceptive. This includes requiring detailed information about the advice provided, such as the identity of the person giving the advice, their motivations, and any potential conflicts of interest. Section 4 further stipulates that proxy advice must be provided in a timely manner, particularly in relation to the convening of meetings and the casting of votes. These provisions are designed to ensure that shareholders and members of superannuation entities receive accurate and timely information, enabling them to make informed decisions. The Regulations impose several obligations on the parties governed by them. Firstly, under Section 5, any person providing proxy advice must ensure that their advice complies with the requirements set out in the Regulations. This includes the need to provide detailed and accurate information about the advice given. Secondly, Section 6 requires that any entity that facilitates the provision of proxy advice, such as a proxy voting service, must ensure that the advice provided through their service is compliant with the Regulations. This includes verifying the accuracy and completeness of the advice before it is disseminated to shareholders or members. These obligations are intended to create a framework that ensures the integrity and transparency of the proxy advice process. Failure to comply with the provisions of the Regulations can result in significant consequences. Section 10 outlines that any person who provides misleading or deceptive proxy advice may be subject to civil penalties, with the maximum penalty for individuals being $210,000 and for bodies corporate being $1,050,000. Additionally, Section 11 imposes criminal penalties for more serious breaches, where the maximum penalty for individuals is imprisonment for up to two years and for bodies corporate is a fine of up to $5.25 million. These penalties reflect the importance of ensuring that proxy advice is accurate and transparent, protecting the interests of shareholders and members in corporate and superannuation entities.